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Income & Expenditure in School finance

Sources of Income & Expenditure 

Sources of Income

Ordinarily, the sources of revenue for education are central and state government grants, allotments of local bodies and private bodies, tuition fees, education cess, income from school funds, endowments, gifts etc.


According to the Constitutional provision, secondary education is the responsibility of the states. But there are certain areas, where the responsibility is shared both by the States as well as the Centre. Centre shares responsibility particularly on those aspects which have bearing on the general economic development of the country and the training for citizenship. Again the Centre takes responsibility over the fundamental rights guaranteed to every citizen, free and compulsory education upto the age of 14. From this it appears, that for the development of secondary education there should be fullest cooperation between the States and the Centre and centrally sponsored sectors. It should include programmes of crucial importance and national in character.

Local Bodies Funds

Although most of the responsibility for the support of education should be on government funds, a total centralization of all financial responsibilities for education at the government level will not be desirable. Hence efforts should be made to raise contributions from the local community, voluntary organisations and the local bodies. Thus, funds from local bodies include amounts of money received from the Municipal Boards. The District Boards, Cantonment Boards, Notified Area Councils, Zilla Parishads and Panchayat Samities out of their general funds or special taxes levied for education.


It refers to a sources other than those mentioned above. It refers to donations, subscriptions, gifts, bequests, fines, sale proceeds, interest on bank balances, rent from buildings etc. It is called public philanthropy. Before independence, this income was accounted for as income from ‘other sources’.

After independence, these receipts began to be shown separately and remaining sources were called ‘other sources’. In accounting the value of the private gifts are assessed in terms of money which is shown as receipt.


The grant is the contribution in form of money or material goods by a bigger governmental unit to a smaller unit assisting the support of education. The grant-in-aid is a “financial contribution in the form of periodic payments by government to an agency or individual by way of assistance to specific purpose.” It is classified into three types, viz., general grant, specific grant and proportional grant. When the grant is made for general purpose of improvement or expansion of education, we call it general grant. If the purpose is specified like primary education, secondary education, collegiate education, enhancement of salaries of teachers, buildings etc., it is called specific grant. In the centrally sponsored sectors it should be given for five or ten years.

Central aid to secondary education recommended by Secondary Education Commission:

  1. The starting of secondary schools providing diversifies coursed more particularly in the rural areas.
  2. The production of better books for children and teachers.
  3. The establishment of institutions for training teachers in technical subjects.
  4. The establishment of centres for encouraging research in important problems of secondary education such as:
    • Curricula of studies.
    • Vocational guidance.
    • Physical and health education.
    • Methods of teaching.
    • Book production research.
    • Techniques of examination
  5. Organisation of refresher courses, seminars and conferences of headmasters and teachers.
  6. Production of suitable educational films and audio-visual aids; and
  7. Encouragement of approved experimental schools.


The sources of revenue at the State level are:

  1. State government grants.
  2. Grant made by municipal and other local bodies directly or through an educational cess.
  3. Private benefactions and grants made by private managements.
  4. School fees.

The state government assigns money from the state revenue to education for the welfare of the children of the nation. We call it specific grant. “These two types of grants provide only a certain proportion of the total expenditure and require a contribution and the meeting of certain stipulations by the receiver of the grant which we call proportional grant. The purpose of these is to encourage improvement or expansion of education.

Grants assigned for education vary from state to state. Grant-in-aid is given to the institutions managed by private authorities to assist them in their educational improvement. Secondary Education Commission recommends that the grants should be used for the following purposes:

  1. Payment of stipends to teachers under training.
  2. Payment of medical officers for medical inspection.
  3. Maintenance in boarding homes of orphans.
  4. Construction and extension of school buildings and hostels.
  5. Furniture, apparatus, chemicals and books for library.
  6. For acquisition of lands for school buildings, hostel or playgrounds.
  7. For crafts or industrial education.
  8. Maintenance grant.

Educational Expenditure

Educational expenditure refers to financial charges incurred by or on behalf of schools for goods and services. “Ordinarily, it refers to charges of the current year and does not include the payments made for the services of the previous year.

Classification of Educational Expenditure

There are three types of educational expenditure. They are as follows:

  1. Current expenditure- It refers to payments made for the purpose of administration and control of education. Maintenance of school plant, salaries of teachers and other staff, supplies to library and teaching etc.
  2. Capital outlay- It is the expenditure made on school sites, playgrounds, equipment and buildings.
  3. Debt charges- It is the payment of interest on loans. Technology department pays the loan in the same financial year which it has borrowed.
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